November budget forecast shows deficit ‒ and uncertainty

The November budget forecast released this week by Minnesota Management and Budget (MMB) shows a small deficit in the current biennium ($188 million for FY 2018-19) and a larger deficit for the following biennium ($586 million for FY 2020-21). In addition, MMB does not include the cost of inflation in its long-term forecasts; it estimates the cost of inflation for FY 2020-21 to be approximately $1.3 billion.

There are significant unknowns at the federal level, including whether tax reform or funding for the Children’s Health Insurance Program (CHIP) will pass, and whether the economy continues its historic expansion. The state’s previous February forecast included assumptions regarding federal legislation that were overly positive ‒ and was higher than the average of 50 other forecasts. This newest November forecast changed those assumptions.

House Speaker Kurt Daudt (R-Crown) indicated that changes in this November forecast were made for political purposes. Senate Majority Leader Paul Gazelka (R-Nisswa) called the report “obsolete on arrival” due to the pending actions at the federal level. Gov. Dayton urged caution and noted that he would not use any budget reserves for what, in his opinion, could be solved with sound budgeting this session.